Goldman Sachs bullish on Apple, raises iPad, Mac, iPhone estimates

Investment bank Goldman Sachs sees Apple outperforming the firm's previous expectations in spite of recent market troubles and has raised its shipping estimates for the iPad, Mac and iPhone.

Analyst Bill Shope issued a note to investors earlier this week lifting the firm's 12-month target price from $480 to $520, citing "increasing competitive momentum and compelling new products" from the company. He specifically mentioned upcoming iPhone, iOS 5, iPod and iCloud products set to arrive this fall, as well as the iPad 3, which he expects in early 2012.

The analyst did warn that worsening macroeconomic conditions could pose a risk for the company, but he noted that Apple has so far been impressively resistant to external macroeconomic pressures.

Goldman Sachs raised its estimates for Apple's September quarter performance to $28.71 billion in revenue and $7.30 earnings per share, up from $27.37 billion and $6.49 previously. For calendar 2011, the firm sees revenues reaching $118.48 billion and $30.53 EPS, compared to its prior forecast of $115.74 billion and $29.34.

Looking ahead to calendar 2012, revenues are expected to soar to $138.62 billion with $34.62 EPS, up from previous estimates of $131.07 billion and $32.56.

Shope views competitors to the iPad as remaining "ineffective," even as momentum has accelerated for Apple's touchscreen tablet. He raised his iPad estimate for the September quarter from 12.70 million units to 13.05 million, also raising his calendar 2011 estimate by 350,000 units to 42.39 million.

"In particular, with the high-profile shutdown of HPs TouchPad effort, the inability of most Android vendors to offer competitive price points, and increasingly aggressive patent actions against Samsung, we believe retailers and consumers have only increased their allegiance to the iPad," he wrote.

The analyst cautioned that iPhone shipments may decline sequentially this quarter as Apple draws down the iPhone 4 in preparation for its next-generation handset. Apple itself revealed that it has guided for a sequential revenue decline this quarter due to a "future product transition," presumably related to the iPhone.

But, he sees iPhone sales picking up in the fourth quarter of calendar 2011, raising his estimate to 26.79 million units, up from 26.33 million previously. The firm now believes Apple will ship 114.47 million iPhones in calendar 2012, as opposed to its earlier estimate of 109.08 million.

As for Apple's Mac lineup, Shope sees the company's momentum remaining "surprisingly healthy" in the face of "tepid" PC demand. He called out the MacBook Air as having created a new category within the PC sector that is more resilient to tablet cannibalization than other portables.

Though Intel is pushing its ultrabook category as a counter to the MacBook Air, Shope believes the learning curve "may be steeper" than it or its partners realize. As such, he has raised his Mac shipment forecast from 4.12 million to 4.40 million units. Projecting 13.9 percent growth for Mac shipments, the analyst expects Apple to record 16.36 million units in 2011 and 18.64 million in 2012.

Don't feed the bears

Shope concluded his note by addressing "the top five bear arguments" against Apple. He countered the assertion that the company has hit a growth ceiling with the iPhone by pointing to its 15 percent market share for smartphones outside of the U.S. Also, though some believe the rumored Amazon tablet will disrupt Apple's ecosystem, Shope does not see it as a near-term threat to iPad momentum.

The analyst also dismissed claims that Apple will struggle now that Steve Jobs has stepped down as CEO. "Apple does not need to reinvent the platform; it just needs to continue executing solidly and managing the platform, which we believe Mr. Cook and the current bench of executives will be more than capable of doing," he wrote.

As for the argument that Apple's gross margins will inevitably decline, Shope posited that Apple's robust content and application ecosystems and its loyal and active installed base will allow the company to preserve its margins and protect it from commoditization.

Lastly, Shope criticized the belief that Apple stock will cease growing because the company has surpassed Exxon to become the largest company in the world in terms of market capitalization. He cited the iPhone maker's low P/E multiple and sustained earnings growth as evidence that investors will continue to trust Apple.

It seems obvious to me that Apple's growth is nowhere near its apex. I'm interested to hear from people who think Apple has reached its aiguille and will now continue to fall as competition eats its lunch. Do you people still exist or have you opened your eyes?

Oh, I didn't say that AAPL wouldn't kick ass, I just said that professional analysts don't know how much they will kick ass.

If you visit the link in my initial response, it shows that professional analysts are basically unable to forecast how much AAPL will kick ass. They consistently underestimate Apple's performance by a WIDE margin.

Again, it is wise for AI readers to ignore articles that promote analyst opinions. Analysts have a well-established track record of being wrong.

Oh, I didn't say that AAPL wouldn't kick ass, I just said that professional analysts don't know how much they will kick ass.

If you visit the link in my initial response, it shows that professional analysts are basically unable to forecast how much AAPL will kick ass. They consistently underestimate Apple's performance by a WIDE margin.

I can't help but think they are doing it on purpose. If they over guess and miss and cost folks money it looks really bad. But if they guess just enough to get folks to buy for a little profit and then they make bank, all is forgiven on the 'mistake'

I can't help but think they are doing it on purpose. If they over guess and miss and cost folks money it looks really bad. But if they guess just enough to get folks to buy for a little profit and then they make bank, all is forgiven on the 'mistake'

Yeah, but the folks that read the full analyses aren't your Aunt Millie investors; AAPL is not really a retail investor's stock. The majority of AAPL shares are owned by the big players, the fund managers, Legg Mason, etc. These are the guys that influence the daily swings in stock price, not these pitiful analysts,

Missing EPS forecasts by a large amount doesn't condone confidence, especially when amateurs are nailing this sh*t.

The fact of the matter is that people predicting Apple's financial performance are doing it in a very bad way, and these poor predictors aren't limited to financial analysts. It also includes the competition. Apple is gobbling up most of the industry's profits (PCs, PMPs, smartphones, tablets, whatever).

Look, Goldman Sachs are increasing estimates, which still probably means that they are targeting too low. Many of these analysts will increase estimates mid-quarter and still come up short. Basically none of them have a grasp on what Apple can do. so they make some pathetic assumption at the start of the quarter, then up their estimates, only to end up woefully short anyhow. This happens quarter after quarter; it's not a one-time miss. That's a systemic and basic lack of understanding of Apple's business and the power of innovation.

It's like predicting that the Phillies will play less than .500 ball and seeing them make the playoffs almost every single year.

That's how bad these "professional analysts" are.

Remember, Bill Shope is near the very bottom of the financial analyst prediction scale. I'm slamming all professional financial analysts, but he's even worse than average.

DO NOT BELIEVE APPLEINSIDER WHEN THEY QUOTE ANALYST PREDICTIONS, ESPECIALLY BILL SHOPE'S.

Oh, I didn't say that AAPL wouldn't kick ass, I just said that professional analysts don't know how much they will kick ass.

If you visit the link in my initial response, it shows that professional analysts are basically unable to forecast how much AAPL will kick ass. They consistently underestimate Apple's performance by a WIDE margin.

Again, it is wise for AI readers to ignore articles that promote analyst opinions. Analysts have a well-established track record of being wrong.

Dude who cares about what every single analyst predicts or doesn't predict. The bottom line is Apple has weathered the most disasterous economic environment not to mention the japanese disaster crisis, steve jobs health, the overblown antennagate, etc etc etc. all of this not by accident but by design.

No company could have "managed" the growth operations successfully that Apple has. Nobody. That alone proves unmatched organizational power. I mean they are moving 30-40 million products every frickin quarter. That's insane. They've developed their own solid retail operation, another strength for long term value.

But... The launch that's coming in the next few weeks will be a blow out blockbuster. The biggest on sale yet. Lines like no other apple launch to date.

I firmly believe there will be two iPhone models. A revamped iPod touch, icloud, iOS 5, all updated iPods, all breaking right before the holidays. This is the first parity launch of a iPhone with so many multiple carriers. This launch could cause a paradigm shift of cell customers worldwide especially here between Verizon, ATT, Sprint.